Dynamics of oil price shocks in Latin American stock markets during global turbulence: A nonlinear autoregressive distributed lag analysis

  • Received September 16, 2023;
    Accepted November 9, 2023;
    Published December 6, 2023
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  • DOI
    http://dx.doi.org/10.21511/imfi.20(4).2023.28
  • Article Info
    Volume 20 2023, Issue #4, pp. 350-359
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This paper investigates the impacts of oil price shocks on the stock markets of six Latin American countries – Argentina, Brazil, Chile, Colombia, Mexico, and Peru – by employing a Nonlinear Autoregressive Distributed Lag (NARDL) approach. This is during periods of global turbulence triggered by the COVID-19 pandemic and Russia’s war in Ukraine. The study used data gathered from January 2020 to July 2023, daily stock prices of the six countries, and West Texas Intermediate (WTI) as a proxy of the oil price index. The analysis revealed that the complex relationship between oil price shocks and stock markets in Latin America has changed significantly since the start of the pandemic and the Russian-Ukrainian War. The findings indicate that the relationship between oil price changes and stock markets is not a straightforward linear correlation, but rather is more complex, with non-linear and counteracting effects, likely due to the uncertainty created by the pandemic and the Russian-Ukrainian War, which has caused investors to be more cautious when responding to oil price shocks.

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    • Table 1. ADF and PP unit root tests
    • Table 2. NARDL test
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